AUDIT TRACK

San Diego has finally caught up on six years of delayed financial audits, but not everyone is celebrating how the city handled the public unveiling of the latest audit.

City Councilman Carl DeMaio has criticized the mayor's staff for releasing the audit before a review by the city's Audit Committee and City Council – a process approved by voters in June.

“The voters were very clear,” said DeMaio, a committee member. “They want to make sure an independent set of eyes look through our books before the city of San Diego issues financial statements and makes representations to Wall Street.”

Jay Goldstone, the city's chief operating officer, said he wasn't trying to circumvent the approval process.

He said the audit was shared with investors this week to meet a Thursday deadline in one of its bond contracts to disclose city finances.

The move was recommended by Stanley Keller, a Boston attorney who is monitoring the city's compliance with Securities and Exchange Commission rules.

Goldstone said the city hasn't met its obligations in that contract for five years, but he wanted to give the latest financial information in the interest of full disclosure. He said it wouldn't look good if the city declined just a few months before it expects to begin borrowing heavily.

Goldstone dismissed DeMaio's criticism.

“He's trying to make something out of nothing, and I don't know why,” Goldstone said.

Completion of the final audit, for fiscal 2008, ends a sorry chapter for San Diego in which it couldn't borrow money at decent interest rates on the public bond market because of faulty financial disclosures.

The city's outside auditor completed his review Thursday, ending the tabulating and accounting aspect of the audit. It won't become official until the Audit Committee and council sign off, and that was made clear to investors, Goldstone said.

The years of audit delays followed a series of revelations about the city's handling of its pension system and market disclosures. The retirement fund developed a $1.4 billion deficit, while the city failed to properly acknowledge it, or other financial burdens, in documents offered to credit agencies.

The situation attracted the attention of federal regulators, who found that San Diego violated securities laws.

The first of the six delayed financial audits – for fiscal 2003 – was released in March 2007 after a three-year examination by KPMG, one of the accounting industry's four major firms. With that audit delayed, the city also fell behind on reports for each subsequent year.

The city needs the final audit completed so it can go forward with selling $350 million in bonds on the public market in May for wastewater projects. Of that, $150 million will be used to refinance bond debt set to come due that same month.

Councilman Kevin Faulconer, who heads the Audit Committee, said that he understood the city's deadline constraints but that the issue could have been discussed at Monday's committee hearing if he had been told earlier.

DeMaio was less forgiving.

“We have had a bad reputation in San Diego – and deservedly so – for issuing false and misleading financial statements, and it just irks me that we're not doing the due diligence,” he said.